Just over a decade ago, cloud accounting software was hard to come by. Now, using it is as simple and convenient as ever.
Before the “cloud” became a thing, with cloud accounting software options, accounting records were stored on a desktop, and managing day-to-day bookkeeping required someone to be in the office recording transactions, paying bills, and invoicing clients.
Often, bookkeeping tasks were postponed until the end of the week, month, or even the end of the year. This was because business owners prioritized serving their clients over spending hours on accounting and bookkeeping. Who could blame them?
But all of that procrastination became apparent when tax time rolled around. Expenses were miscategorized or completely forgotten, bank accounts weren’t reconciled so errors slipped through unnoticed, and personal expenses were co-mingled with those of the business.
Tax planning was useless because incorrect financial statements couldn’t produce accurate tax estimates. Their accountants spent countless (expensive) hours just correcting errors before they could prepare a tax return.
Fortunately, cloud accounting software has brought an ever-growing suite of tools and technologies that can help reduce the headaches of managing invoices, receipts, and bills – by simply using online accounting software.
Cloud technology has revolutionized the accounting world, not just for small business owners, but for their accounting and tax professionals. Let’s take a look at five ways cloud accounting software simplifies your day, so you can say bye-bye to traditional accounting software for expense tracking.
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1. Easily Record Your Business Expenses
Is your wallet or glove box crammed with expense receipts? How many of those will actually make it onto your tax return at year-end? Unless you record expenses as they occur, it’s easy to lose track or forget about them when it’s time to prepare your tax return.
Cloud accounting software allows you to easily keep track of business expenses. Most cloud-based accounting programs connect to your business credit card or checking account and automatically download transactions as they occur as part of the accounting process.
Some business owners keep bank and credit card statements to support their expenses, but if your business is selected for an IRS audit, those statements aren’t enough to support your deductions —auditors want receipts, and that’s where accounting software comes in handy.
With cloud accounting software, you can snap a photo of your receipt with your phone or mobile device or save an emailed receipt as a PDF. Those receipts can be attached to your expenses in just a few seconds. And bonus, when you upload your receipt to FreshBooks, the information will automatically be captured as an expense.
No more shoeboxes full of faded receipts, no more lost deductions, and most importantly, no more manual data entry.
2. Cloud Accounting Software on Mobile Means You Can Work on the Go
Why did you start your own business? If you’re like most entrepreneurs, being your own boss is about freedom and flexibility. For you, that might mean taking a working vacation at the beach, traveling, and not being tied to a desk or an office.
With traditional accounting software (like on a desktop), it’s nearly impossible to keep running your business effectively while you’re away. Often, you can’t invoice clients, pay bills, or access financial reports unless you’re in the office. Whether you’re attending a conference, taking a vacation, tracking your milage, or just working from a remote location for a while, cloud accounting gives you access to your financial data (like income and expense tracking) wherever you are, at any time.
3. Make Fast and Simple Software Updates
The old way of working with accounting software involved purchasing an expensive software suite and installing it on a computer. When a new version came out each year, small business owners would either budget for it or continue working with an outdated – and often unsupported – version of the software.
If the business needed to grant multiple people access to the accounting data, the business would have to purchase additional licenses. Along with the expense of multiple licenses, having extra users made upgrades a pain because new releases had to be installed on each machine individually.
However, cloud accounting has really simplified the software upgrade process. You no longer need to worry about installing software, updating to new releases, or backing up data. You just access the software through an app or web browser. A cloud application service provider takes care of updates, backups, and security without needing to hire your own IT help—all for an affordable monthly fee instead of a hefty upfront investment.
4. Create a More Seamless Experience With App Features
You probably use quite a few different apps, business systems, or software solutions to get your accounting in order. Do any of those applications complement one another? Integrated apps (or add-ons) can save you a lot of time (and money) because they easily transfer data (such as financial data) from one application to another.
Think about how you track your additional sources of revenue for your business. The old way involved a massive spreadsheet that you’d have to log each revenue source as it comes in. Now, apps like Income Importer allow customers to import non-invoice income from applications like Square, Etsy, and Stripe.
This integration allows customers to easily track all of their income in FreshBooks for accurate reporting by conveniently integrating with your cloud accounting software. Without integration, you’d have to remember to track and take note of all accounting reports for your businesses revenue.
Who actually takes the time to do that every month? Better yet, who remembers? It’s more likely you’d put off the task until year-end when you’re scrambling to gather all of your other tax documents and financial data.
Of course, tracking business revenue is only one example of how integrated applications save time. Solutions are available for online payment acceptance, payroll, time tracking, scheduling, sales tax reporting, project management, and more. With add-ons like these, the pesky administrative tasks that used to take a small business owner hours, only take minutes.
Cloud accounting makes it easy to share information with accounting professionals or tax preparer. This increases security and collaboration while reducing the traditional back-and-forth process.
Let’s look at an example of a cloud accounting software solution.
Say you are a contractor considering investing in a new piece of equipment. You’re not sure whether it’s the right move for your business. Should you lease or buy? Will the monthly payments cause an issue with cash flow? What will the impact be on your taxes?
Using old desktop accounting software, you’d probably call your accountant to explain the situation. Your accountant would ask you to send over your year-to-date financials (aka your financial information). You’d either have to print them out and hand-deliver or email them—hopefully, you remembered to encrypt that email for security purposes.
Once the accountant received your financials, they would review them. They may need you to generate reports or might have more questions about the cost of the equipment and your lease or financing options. It would probably take a day or two at a minimum for your accountant to run the numbers and provide the information you need to make a decision.
Now, let’s consider how that scenario would play out with cloud accounting software. When you call the accountant, they are able to log into the accounting software while you’re on the phone.
The accountant takes a quick look at your information and can see your year-to-date net income right away. We call that good cloud accounting solutions. And while they’ll probably still have to call you back after they’ve had the chance to run some numbers, the process will take hours instead of days when using cloud accounting software.
The same collaboration can occur whether you’re considering investing in equipment, signing a new contract with a client, purchasing real estate, or hiring an employee. Both you and your accountant have easy, secure access to the real-time financial information that can be used to make better decisions with cloud software.
Whether you’re currently relying on a spreadsheet or a traditional desktop solution for your small business accounting, consider moving to cloud accounting software. It won’t just make your financial management more efficient. It will give you your time back. That way, you can start focusing on your core business goals, and improve the long-term success of your company.
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Updated October, 2023